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Yemen ends fuel subsidies, nearly doubling prices

Ahmed Al-haj Associated Press

Updated:
07/30/2014 12:58:09 PM EDT

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Yemenis chant slogans after setting tires on fire during a protest against the inflation of fuel prices in Sanaa, Yemen, Wednesday, July 30, 2014. Yemeni protesters blocked roads by burning tires on streets in the Yemeni capital against the government's decision to raise fuel prices. The fuel crisis which hit the country for the past several months has lead to many gas stations shutting down and cars queuing for miles at stations that still sell fuel. The crisis affected public transportation drivers mostly. (AP Photo/Hani Mohammed)

According to new prices posted in the capital, Sanaa, the government raised the price of regular gasoline to 200 Yemeni riyals per liter (93 U.S. cents) from 125 riyals (58 U.S. cents). Diesel used for public transport and trucks rose to 195 riyals per liter (91 U.S. cents) from 100 riyals (46 U.S. cents).

The price hike in Yemen is on par with the U.S. average price per liter for gasoline, which is 92 cents — or $3.51 per gallon. The government did not remove its subsidies on natural gas.

Past price hikes have led to street riots, but only scattered demonstrations were seen Wednesday in Sanaa. Security forces and armored vehicles quickly dispersed protesters by firing into the air. Security officials said one woman was killed in unclear circumstances.

The officials spoke on condition of anonymity because they were not authorized to speak to journalists.

In 2005, a similar decision led to days of deadly riots that killed 36 people, as demonstrations spread to more than half a dozen cities. Rioters smashed shops, set fire to cars and fought security forces. They also turned their anger against the government, tearing up pictures of top officials and calling for the ouster of the government. The riots forced the government to reverse its decision.

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This time, officials raised prices when the capital was nearly empty as many residents left the city to mark Eid al-Fitr, the three-day celebration at the end of the Muslim holy month of Ramadan.

Yemen has spent nearly $3 billion this year so far on fuel subsidies, roughly 20 percent of state expenditure, according to a Finance Ministry statement carried by Yemen's official news agency SABA. The report also said that the government spent $22 billion in the past decade on fuel subsidies. It said the subsidies cause a budget deficit of $5 billion, or 13 percent of Yemen's gross domestic product.

"Lifting subsidies on fuel became a national necessity to avoid a state of economic collapse," the report said. It said money saved will be directed to support other sectors such as education and health services.

The end of fuel subsidies comes as part of an austerity plan the government announced earlier this year, which includes slashing expenses on officials traveling abroad and cars used by ministers.

As one of the Arab world's most impoverished nations, Yemen is struggling with both economic and security challenges, as its military faces al-Qaida militants, along with a secessionist movement in the south and northern rebel forces in the north.

After a year-long uprising in 2011, Yemen's longtime ruler Ali Abdullah Saleh was forced to relinquish power. Current President Abed Rabbo Mansour Hadi has accused the former government's loyalists of trying to impede reforms and of carrying out sabotage attacks which have led to days-long power outages and a fuel crisis.